27 February 2017
Hon Julie Bishop
Minister for Foreign Affairs
By email: [email protected]
Dear Madam,
Re: Call for submissions for Foreign Policy White Paper
We write in response to the Department of Foreign Affairs and Trade’s call for submissions in
relation to the forthcoming White Paper on Australia’s Foreign Policy. Our submission focuses on
Australia’s role in combatting international bribery and corruption. We regard this as a cross-cutting
issue, firstly because it touches on several aspects of Australia’s foreign policy and secondly
because success requires the participation of several different actors in society. Among these actors,
Business and Civil Society have important parts to play, but the role of Government is crucial.
On 24 August 2015, we made a submission to the Senate Economics References Committee inquiry
into foreign bribery. We understand that the committee was suspended following the dissolution of
the Senate and the House of Representatives in May 2016, but that a reconstituted committee has
now resumed the inquiry during the present parliament. Our earlier submission focussed on the
details of Australia’s laws against bribery. This submission addresses the same topic through a
broader foreign policy lens.
Our overall argument is that Australia has an important part to play in both regional and global anticorruption initiatives. It is already making a constructive contribution, however it can go further.
Proactive government initiatives to address corruption will help Australian businesses in the regional
and global economies, while also yielding broader benefits to the public interest.
Control Risks’ perspective
We represent the Sydney office of Control Risks, a global risk consultancy specialising in political,
security and integrity risk. Our mandate is to help our clients understand and manage the risks of
operating in complex environments in the Asia-Pacific region and beyond. We operate out of 36
global offices, including those in the Asia-Pacific region located in Beijing, Delhi, Hong Kong,
Jakarta, Mumbai, Shanghai, Singapore, Sydney and Tokyo, and at any one time we have
consultants supporting clients on the ground right across the region.
For us too, anti-corruption is a cross-cutting theme: anti-corruption consultancy is both a service in its
own right and an integral part of all our service offerings. We believe that this experience gives us a
distinctive perspective from which to comment on the issue.
The costs of corruption
The costs of corruption come in many forms. At a strategic level, corruption can deter companies
from pursuing otherwise attractive international opportunities. In Control Risks’ International
Business Attitudes to Corruption Survey 2015-2016, we tested the views of more than 800
international companies. Some 30% of the global sample, including 25% of Australian responders,
said that their companies had decided not to conduct business in a particular country because of the
risks posed by corruption.
Figure 1: Companies that decided not to conduct business in a particular country because of the risk
of corruption. By headquarters, excluding companies that do not operate internationally.
Control Risks, International Business Attitudes to Corruption Survey, 2015-2016
In the same survey, a quarter of Australian companies said that the risk of corruption was the
primary reason for pulling out of a deal on which they had already spent time and money. This is
lower than the global average of 41% but still a considerable figure.
Figure 2: “Has the risk of corruption been the primary reason for you pulling out of a deal in which you
have already spent time and money?” By companies’ headquarter country.
Control Risks, International Business Attitudes to Corruption Survey, 2015-2016
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At an operational level, 24% of Australian companies said that refusal to make so-called “facilitation
payments” – small “grease payments” to speed up routine government transactions – would lead to
“major delays and significant costs to their business”. This figure was significantly higher than the
global average of 18.6%, and this may be because of Australian companies’ greater exposure to
Asian economies where demands for such payments are often commonplace.
Our own experience of helping companies in high-risk environments in the Asia-Pacific region
illustrates the hazards. In cases where companies refuse to pay, we have seen the entire range of
reactions, from mild inconvenience (such as weeks-long delays in official processes) to serious
operational disruption (e.g. police in a South-east Asian country refused to let a client’s delivery
trucks pass a checkpoint just outside its gates).
Our clients frequently ask, “Is it possible to operate successfully without paying bribes in Country X”.
We have helped many companies navigate their way through high corruption environments. We can
therefore usually offer an affirmative answer to the question with some confidence. However, we do
not wish to underestimate the scale of the difficulties. Well-designed strategies to help individual
companies are an important beginning. At the same time, we need to see broad-based initiatives to
address the problems that contribute to high levels of corruption.
Business must play its part…
In making this observation, we are clear that the first task of private sector companies is to ensure
that they themselves follow high standards of business integrity. The basic requirements are now
well understood. Companies require effective anti-corruption policies and compliance procedures
that are understood by every employee. They also require well-targeted risk assessments to help
them avoid potential integrity hazards, and this should focus on commercial sectors and specific
transactions as well as countries and regions.
On a similar note, companies can make a positive contribution through participation in collective
private sector initiatives to promote high standards. In Sydney, Control Risks is itself a corporate
supporter of both Transparency International Australia and the UN Global Compact Network
Australia. We are in regular contact with similar initiatives elsewhere in the region.
Having companies set the right example on the ground is invaluable. In Indonesia, a country where
gifts and entertainment remain a key part of maintaining business relationships, we have seen an
increasing number of companies (including those from Australia) send letters to business partners
and clients each year, requesting that gifts (if given at all) not exceed a particular amount. In
Myanmar, there is growing acceptance that few foreign companies will make illicit payments because
of the behaviour of companies that are sending the right message.
These developments are promising; they suggest that business practices can change, albeit
gradually. Australian companies facilitate this process by demonstrating that it is possible to operate
successfully without resorting to corruption.
… but government involvement is essential
On its own, the private sector can only go so far. Ultimately, good governance depends on
governments, not companies. We believe that the Australian government – working as a partner
rather than a long-distance critic – has an important role to play in building capacity and promoting
better governance standards throughout the region.
In that respect, we note with appreciation that Australia is a sponsor of the United Nations
Development Programme (UNDP) “Anti-Corruption for Peaceful and Inclusive Societies” initiative.
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On a similar note, we recommend that the Australian government should look for opportunities to
support country-specific initiatives, including multi-sectoral projects that involve private sector
partners. Positive examples include the current Maritime Anti-Corruption Network (MACN) project
addressing corruption in Indonesian ports, and the Integrity Initiative in the Philippines.
Extra-territorial enforcement
Finally, we turn to the issue of Australia’s extra-territorial enforcement of its anti-corruption laws. Our
submission to the Senate Economics References Committee addressed some of the technicalities of
the laws. Here we wish to address the broader policy issues. Bluntly put, Australia cannot aspire to
lead by example in regional anti-corruption initiatives unless it enforces its own laws against foreign
bribery.
We note that Transparency International’s 2015 Exporting Corruption report (the most recent in the
series) classifies Australia as a ‘moderate’ enforcer of the extra-territorial laws that it introduced in
accordance with its commitments under the OECD Anti-Bribery Convention. This assessment
appears generous in that it seems to be based on the number of Australian preliminary investigations
of foreign bribery, not convictions or court cases. We believe that Australia should aspire to be – in
Transparency International’s terms – an ‘active’ enforcer of the convention.
In making this observation, we wish to draw attention to one more finding from our International
Business Attitudes to Corruption Survey. It is sometimes suggested that international business
people regard tough international laws as an obstacle to business. Maybe some do. However, a
clear majority of our respondents (81%) agreed with the proposition that international anti-corruption
laws “improve the business environment for everyone”, and this included 89% of Australian
companies surveyed. A further 64% either “agreed” or “strongly agreed” with the view that the laws
“make it easier for good companies to operate in high-risk markets”.
If the Australian government is to be credible in anti-corruption circles, it needs well-drafted laws. It
also needs to be able to demonstrate that it applies them.
Yours faithfully
Mark Pulvirenti
Partner
John Bray
Director
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